As the United Kingdom introduces pivotal shifts to its tax regulations, affluent residents are increasingly seeking refuge in the United Arab Emirates (UAE). Data from Henley & Partners, a leading investment consultancy, reveals that the UAE is now the second most favored destination for high-net-worth individuals (HNWIs) aiming to relocate from the UK, particularly in light of the forthcoming changes to the tax regime.
A Significant Shift in Migration Patterns
In recent years, the UK has witnessed an unprecedented exodus of wealthy individuals. In the last year alone, over 800 millionaires made the UAE their new home, while the EU attracted the highest number of relocations, totaling approximately 6,500. Notably, Nassef Sawiris, Egypt’s richest billionaire and owner of Aston Villa football club, has decided to shift his family office to Abu Dhabi, further underscoring the UAE’s growing allure.
The Impact of New Tax Policies
The United Kingdom’s new government, led by Keir Starmer, is instituting changes that will subject non-domiciled individuals’ overseas assets to UK inheritance tax, effective April 2025. Previously, non-doms were able to pay a £30,000 annual fee to safeguard their offshore income and capital gains from UK taxation. A significant influx of wealthy individuals has been observed following the general election in July, where Mr. Starmer’s party assumed power after over a decade of Conservative leadership. According to recent statistics, the UK lost a net total of 10,800 millionaires to migration last year—an increase of 157% compared to 2023.
Concerns About Economic Consequences
A survey conducted by Oxford Economics highlighted that nearly two-thirds of affluent individuals are considering leaving the UK due to the imminent tax reforms. According to the Autumn Budget 2024, the government plans to transition from the remittance basis to a new short-term tax regime for “qualifying new residents,” alongside alterations to the criteria for inheritance tax obligations. These proposed reforms are expected to reshape the tax liabilities of many non-UK domiciled individuals, significantly influencing their financial planning. The Office for Budget Responsibility has estimated that abolishing the non-dom regime could generate around £3 billion annually. However, contrasting analyses suggest that the changes may negatively impact the Exchequer by up to £900 million each year. The Adam Smith Institute has cautioned that these reforms could render the economy £1.3 billion smaller by 2035, potentially resulting in over 23,000 job losses. Furthermore, the Growth Commission warns that these measures could impede economic growth, with projections indicating a potential GDP decrease of 0.5% and a revenue reduction of £5 billion.
New Tax Implications for Non-Domiciled Individuals
Starting April 6, non-UK assets will be assessed for inheritance tax based on an individual’s residency status over the previous two decades. If a non-dom individual passes away, their UK-based estate will be subject to inheritance tax, but previously, their overseas assets—including properties and bank accounts—remained unscathed. With the new policies, this protective boundary is expected to collapse, altering the financial landscape for many. As the fiscal environment becomes more complex, wealthy individuals are seeking favorable alternatives, such as the UAE, which offers alluring tax structures and lifestyle benefits.
Conclusion
The tax reforms in the UK are significantly influencing wealthy individuals’ decision-making regarding relocation. As the UAE rises as a prime destination for those seeking to mitigate their tax liabilities, it raises pertinent discussions about the broader implications of these policy changes on the UK’s economy and migration patterns.
read about 2025 UAE Government Plans.
